Hyatt Hotels Shares Advance After Offering Boosts IPO Market

By Nadja Brandt and Michael Tsang

Nov. 5 (Bloomberg) -- Hyatt Hotels Corp., the chain controlled by Chicago’s Pritzker family, climbed in its first day of trading after raising $950 million in the third-largest U.S. initial public offering this year.

Hyatt added $1.89, or 7.6 percent, to $26.89 as of 10:03 a.m. on the New York Stock Exchange. The Pritzker family sold 38 million Class A shares at $25 each and will receive all the proceeds from the sale. The total doesn’t include the 5.7 million additional shares the underwriters may purchase, which would push the value to $1.09 billion.

Hyatt was priced near the high end of the forecast range of $23 to $26 after U.S. hotel operators outperformed the Standard & Poor’s 500 Index as the economy recovered from the deepest recession since the Great Depression. The offering came after bankers pulled IPOs of PlainsCapital Corp., Aviv REIT Inc. and AEI in the past week after failing to find enough buyers.

“Investors are being very selective when it comes to IPOs,” said Walter Todd, who oversees $750 million as co-chief investment officer at Greenwood Capital Associates LLC in Greenwood, South Carolina. “Many people have their arms around Hyatt because it’s a well-established company. People don’t want to take the risk with companies they don’t understand.”

Hotel Valuations

Hyatt runs 413 hotels around the world under its namesake brand and will be the third-largest publicly traded U.S. hotel chain based on 2008 sales, data compiled by Bloomberg show.

The mid-point of Hyatt’s offering price range values the company’ stock- and bond-market capitalization at 13 times its estimated 2010 earnings before interest, taxes, depreciation and amortization, based on data from Research Edge LLC.

Marriott International Inc., the biggest U.S. hotel chain, has a ratio of 13.5 on the same basis, Research Edge estimates show. The company’s shares have surged 31 percent this year, beating the 16 percent rise in the Standard & Poor’s 500 Index. Starwood Hotels & Resorts Worldwide Inc., which has jumped 66 percent in 2009, has the same valuation as Hyatt.

Hyatt had a net loss of $31 million in the nine months ended Sept. 30, as revenue fell 17 percent to $2.4 billion, according to a regulatory filing.

Marriott had a loss of $452 million from revenue of $7.53 billion in the same period. Starwood, the second-largest U.S. hotel chain, earned $268 million on sales of $3.56 billion.

Long-Term Debt

Hyatt had $845 million in long-term debt versus $1.3 billion in cash at the end of the third quarter, according to its regulatory filing. At Marriott, long-term debt totaled $2.52 billion, while the Bethesda, Maryland-based company had $130 million in reserves, data compiled by Bloomberg show. White Plains, New York-based Starwood’s long-term borrowings equaled $3.36 billion and it had $113 million in cash.

William Crow, a St. Petersburg, Florida-based analyst at Raymond James & Associates Inc., said demand for Hyatt’s IPO may indicate that investors are growing more optimistic that the global economy is recovering from the first contraction since World War II.

France, Germany and Hong Kong have exited recessions, while the U.S. Commerce Department said last month that the world’s largest economy expanded at a 3.5 percent pace last quarter.

“The pricing toward the upper end is a positive takeaway,” Crow said. “This is an opportunity for investors to make sizeable bets on an economic recovery not just in the U.S. but globally given Hyatt’s global reach.”

50 Percent Rally

More U.S. companies have been offering their shares in the past two months than at any time in almost two years, data compiled by Bloomberg show. IPOs have increased as sellers took advantage of the more than 50 percent rally in the S&P 500 from its March low to unload their stakes.

The revival hasn’t coincided with bigger returns.

The offerings of American companies in September and October outperformed the S&P 500 by 0.5 percentage point on average in the first month of trading through yesterday, the worst performance in Bloomberg data going back 14 years. IPOs by U.S. companies have beaten the S&P 500 by an average 21.3 percentage points since 1995, the data show.

PlainsCapital, a bank-holding company based in Dallas, postponed its IPO yesterday, citing “recent volatility in the financial markets.” The company planned to raise $240 million in its offering.

Aviv REIT, the Chicago-based real-estate investment trust that operates nursing homes in 21 U.S. states, shelved its IPO on Nov. 3. The postponement came just five days after bankers were forced to pull an $800 million offering by George Town, Cayman Islands-based AEI after they couldn’t find enough buyers for the former overseas unit of Enron Corp.

Underwriters

Goldman Sachs Group Inc., the lead underwriter for Hyatt’s IPO, also managed the AEI offering.

JPMorgan Chase & Co. in New York was the sole underwriter for PlainsCapital, while New York-based Morgan Stanley and Citigroup Inc. and Charlotte, North Carolina-based Bank of America Corp. were the underwriters for Aviv’s IPO. JPMorgan, Citigroup and Zurich-based Credit Suisse Group AG, ran the AEI sale along with Goldman Sachs in New York.

Hyatt’s IPO was originally scheduled for today. After the pricing of Hyatt was announced, Ancestry.com Inc., the Provo, Utah-based online provider of family histories, sold 7.41 million shares in an IPO at $13.50 each, the midpoint of its forecast range.

Voting Power

Hyatt set up two classes of shares that give the Pritzker family more voting power than other shareholders.

The family will own about 80.7 percent of the company’s Class B common stock, representing about 62.4 percent of shares outstanding and 78.4 percent of total voting power. Each Class B share is entitled to 10 votes compared with one vote per Class A share, according to company filings.

Penny Pritzker, who served as President Barack Obama’s campaign finance chairwoman and is the first cousin of Hyatt Executive Chairman Thomas J. Pritzker, serves on the board of the company as an independent director.

Hyatt’s IPO has conflicts that allow the founding Pritzker family to benefit ahead of shareholders, research firm Green Street Advisors said in a report last week.

“Simply put, Hyatt’s corporate governance is the worst in our entire coverage universe,” wrote analyst John Arabia at the Newport Beach, California-based firm. “The existing owners are sending a strong signal to outside public shareholders that the Pritzker family will firmly control Hyatt, even if the family’s economic ownership interest falls below 50 percent.”

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net; Michael Tsang in New York at mtsang1@bloomberg.net

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U.K. Stocks Pare Losses; Tesco, Next Advance, Mining Shares Drop

By Roger Neill

Nov. 5 (Bloomberg) -- U.K. stocks pared declines as a rally in retailers Tesco Plc and Next Plc countered a sell-off in mining companies.

The benchmark FTSE 100 Index retreated 0.48, or less than 0.1 percent, to 5,107.41 at 1:42 p.m. in London, having fallen as much as 1.4 percent earlier.

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U.S. Stocks Advance on Drop in Jobless Claims, Cisco Earnings

By Sapna Maheshwari

Nov. 5 (Bloomberg) -- U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a fourth day, as jobless claims and worker productivity beat forecasts and Cisco Systems Inc. said a global economic recovery spurred a rebound in sales.

Cisco, the biggest maker of networking equipment, gained 2.4 percent after earnings topped analysts’ estimates and the company expanded its stock buyback plan by $10 billion. Research In Motion Ltd. rose after saying it will repurchase as much as $1.2 billion in shares. All but one of the 30 stocks in the Dow Jones Industrial Average rose as government data showed initial claims for unemployment benefits dropped to 512,000 last week and worker productivity surged at the fastest pace in six years.

The S&P 500 added 0.7 percent to 1,053.47 at 9:36 a.m. in New York. The Dow increased 89.7 points, or 0.9 percent, to 9,891.84. About six stocks advanced for each that fell on the New York Stock Exchange.

“We’ve actually seen more good news than bad across a broad spectrum of economic data,” said Art Hogan, the chief market analyst at New York-based Jefferies & Co. “We look at the initial jobless claims as another piece of economic data we’re pretty happy with,” he said. “The most important thing is the non-farm productivity number."

Nine of 10 industry groups in the S&P 500 advanced as the decrease in unemployment claims signaled that job losses are slowing as the economy begins to recover. The Labor Department’s measure of worker output jumped at a 9.5 percent annual rate, topping the highest estimate of economists surveyed by Bloomberg, as labor costs fell 5.2 percent to cap the biggest 12-month decrease since records began in 1948.

Tomorrow’s Jobs Report

The jobless claims data helped ease concern that rising unemployment will stifle the economy’s rebound. The government is projected to report that payrolls fell by 175,000 workers last month, according to the median of estimates in a Bloomberg News survey before tomorrow’s Labor Department report. The jobless rate probably climbed to 9.9 percent, the highest since 1983, according to the survey.

The S&P 500 has surged 56 percent from a 12-year low in March after $11.6 trillion in government spending, lending and guarantees returned the economy to growth following four straight quarters of contraction. The index is trading at more than 21 times earnings, according to weekly data compiled by Bloomberg. That’s near the highest level since July 2002.

Cisco added 2.6 percent to $23.90. The company’s net income fell 19 percent to $1.79 billion, or 30 cents a share, in the first quarter, which ended Oct. 24. Excluding stock compensation and some other costs, profit was 36 cents, beating the 31-cent average estimate in a survey of analysts.

‘Very Optimistic’

Cisco Chairman and Chief Executive Officer John Chambers, one of the first technology leaders to herald the recession two years ago, said he now sees a global economic recovery, fueling a rebound in his company’s sales this quarter.

‘‘Cisco is talking about a recovery around the world, Chambers is being very optimistic and people listen to him,” said William Dwyer, chief investment officer at Baltimore-based MTB Investment Advisors, which oversees $13 billion. “People are a little cautious, they like what they’re seeing, but there’s an awful lot built into the market.”

Earnings have exceeded the average analyst estimate at 81 percent of S&P 500 companies that have reported third-quarter results so far, according to data compiled by Bloomberg. That would mark the highest full-quarter proportion in data going back to 1993.

Research In Motion, Whole Foods

Research In Motion, the maker of the BlackBerry phone, added 3.1 percent to $59.37.

Whole Foods Market Inc. slid 9.6 percent to $28.99. The natural-food grocer forecast full-year earnings of as little as $1.05 a share, trailing the average estimate of $1.11 from analysts in a Bloomberg survey.

U.S. stocks yesterday erased most of a 156-point rally in the Dow average after a House bill to curb credit-card rates spurred concern about bank earnings, outweighing the Federal Reserve’s plan to keep interest rates at a record low.

The Bank of England slowed the pace of bond purchases as signs of an economic recovery give policy makers scope to wind down their money-printing program next year. The European Central Bank may signal it’s moving closer to withdrawing emergency stimulus measures after leaving its benchmark interest rate at a record low today.

For Related News and Information:

To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net.

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Asian Stocks Decline on Growth Concerns; Doosan Heavy Slumps

By Jonathan Burgos and Patrick Rial

Nov. 5 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index down for the third time in four days, as South Korea said it’s “unclear” whether the economic rebound will be sustained and New Zealand’s unemployment rate rose.

Samsung Electronics Co., Asia’s biggest maker of chips and mobile phones, lost 2.9 percent in Seoul as the country’s finance ministry said factory production probably slowed in October. Doosan Heavy Industries & Construction Co. sank 8.6 percent after brokerages cut their share-price targets. Telecom Corp. of New Zealand, the country’s largest phone company, dropped 2.4 percent as the nation’s unemployment rate rose to a nine-year high.

The MSCI Asia Pacific Index dropped 0.4 percent to 114.85 as of 7:28 p.m. in Tokyo. The gauge has slumped 5.2 percent from a 13-month high on Oct. 20 amid concerns the withdrawal of stimulus measures will cause the global recovery to falter. The index is still up 63 percent from a five-year low on March 9.

“The market is now reaching the point where monetary stimulus policies stop pushing up asset prices and earnings become the main focus,” said Koichi Kurose, who helps oversee $4.6 billion as chief strategist at Resona Bank Ltd.

Japan’s Nikkei 225 Stock Average declined 1.3 percent to 9,717.44 as the yen rose against all 16 major counterparts amid higher demand for the currency as a refuge.

South Korea’s Kospi Index dropped 1.8 percent and Hong Kong’s Hang Seng Index declined 0.6 percent. New Zealand’s NZX 50 Index fell 0.7 percent, while Australia’s S&P/ASX 200 Index lost 0.7 percent.

Takeover Bids

Sanyo Electric Co. tumbled 20 percent as Panasonic Corp. started a bid for the company at a discount. Among stocks that gained, Acom Co., Japan’s largest consumer lender by value, rose 7.6 percent after Citigroup Inc. upgraded the stock. Transurban Group, owner of toll roads in Australia and Virginia, surged 19 percent on speculation it will receive a higher takeover bid.

Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The gauge rose 0.1 percent yesterday as the Federal Reserve said it will keep interest rates near zero for “an extended period” and specified for the first time that policy will stay unchanged as long as inflation expectations are stable and unemployment fails to decline.

The Fed is “quite concerned that a premature pullout of the low-interest environment and the withdrawal of stimulus spending will be detrimental to the U.S. economy and the rest of the world,” said Jofer Gaite, a fund manager at the Manila- based Government Service Insurance System, which has $10 billion in assets. “The ongoing recovery is still fragile and the Fed is resorting to all it can to avoid a prolonged recession.”

Balanced Growth

Policy makers around the world are trying to ensure growth doesn’t collapse following the withdrawal of policies introduced to drag the global economy out of its worst slowdown since World War II. Australia yesterday raised interest rates for the second time in four weeks, while the Bank of Japan decided on Oct. 30 to end corporate-debt buying programs.

Stocks in the MSCI Asia Pacific Index are valued at 22 times estimated earnings, compared with 17 times for the S&P 500 and 15 times for Europe’s Dow Jones Stoxx 600 Index.

Samsung Electronics declined 2.9 percent to 712,000 won. South Korea remains “too dependent” on external demand and the country needs to balance between export and local consumption, Finance Minister Yoon Jeung Hyun said.

The government will continue its “macroeconomic policies and try to create more jobs and boost investment and consumption,” the country’s Finance Ministry said in a monthly report today.

Reducing Debt

Doosan Heavy Industries slumped 8.6 percent to 59,700 won, set for its lowest closing level since July 15. Goldman Sachs Group Inc. and Credit Suisse Group AG cut their share-price targets after the company reported a third-quarter net loss.

Korean Air Lines Co., the nation’s biggest carrier, lost 1.8 percent to 43,500 won after the Maeil Business Newspaper reported that creditors had called on the company to increase capital in order to lower debt ratios.

In Wellington, Telecom New Zealand dropped 2.4 percent to NZ$2.48, while Fletcher Building Ltd., the world’s largest maker of laminated building board, lost 1.6 percent to NZ$7.86.

The nation’s unemployment rate rose to 6.5 percent in the third quarter from 6 percent in the previous three months, government statistics showed. Central bank Governor Alan Bollard said a strengthening currency will slow the nation’s recovery from a recession.

In Tokyo, Sanyo tumbled 20 percent to 172 yen after Panasonic offered to buy the company for a price of 131 yen a share. Sanyo stock closed yesterday at 216 yen.

Acom, Takefuji

Goldman Sachs and two other banks that in 2006 bailed out Sanyo, the world’s biggest maker of rechargeable batteries, have agreed to sell a combined 50 percent stake for 403 billion yen ($4.5 billion).

Among stocks that gained today, Acom rose 7.6 percent to 1,596 yen. Citigroup upgraded the shares to “hold” from “sell.” The brokerage raised its rating on Japan’s consumer lenders to “neutral” from “bearish,” saying the government may relax loan restrictions.

Promise Co. and Takefuji Corp. each had their ratings boosted as well. Promise advanced 15 percent to 786 yen and Takefuji climbed 19 percent to 488 yen.

In Sydney, Transurban Group surged 19 percent to A$5.24. The company rejected an unsolicited takeover offer from Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan. The two funds currently hold a combined 28 percent stake in Transurban, according to Bloomberg data.

To contact the reporters for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.

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Brazil’s Bovespa Index Gains on Earnings, Led by Gerdau, Vivo

By Allen Wan

Nov. 5 (Bloomberg) -- Brazilian stocks rose for a third day after Vivo Participacoes SA and Gerdau SA reported profit that exceeded analyst estimates, signaling an earnings recovery in Latin America’s largest economy.

The Bovespa index rose 0.4 percent to 64,136.10 at 8:42 a.m. New York time. Gerdau climbed 2.6 percent to 28.21 reais. Vivo advanced 3.2 percent to 47.66 reais.

To contact the reporter on this story: Allen Wan in New York at awan3@bloomberg.net

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